Answer the Following Questions Using the Information Below:
Calculate the Division

question 68

True/False

Answer the following questions using the information below:
Calculate the Division operating profit for the Don's Cricket Bat Company which manufactures cricket bats.It has two divisions: the Bat Blade Division and the Assembly Division.The Bat Blade Division manufactures blades for the Assembly Division,which splices handles to the blades and sells the completed bats to retailers.The Bat Blade Division 'sells' blades to the Assembly Division.The market price for the Assembly Division to purchase a blade is $40.(Ignore changes in inventory. )The fixed costs for the Bat Blade Division are assumed to be the same over the range of 20 000-50 000 units.The fixed costs for the Assembly Division are assumed to be $14 per bat at 50 000 units.
Costs per blade are:
$\begin{array}{ll}\text { Direct materials } & \$ 8 \\\text { Direct labour } & \$ 6 \\\text { Variable overhead } & \$ 4 \\\text { Division fixed costs } & \$ 2\end{array}$

Assembly's costs per completed bat are:
$\begin{array} { l r } \text { Direct materials } & \$ 12 \\ \text { Direct labour } & \$ 4 \\ \text { Variable overhead } & \$ 1 \\ \text { Division fixed costs } & \$ 14 \end{array}$
-A disadvantage of using budgeted costs for transfer prices is that inefficiencies in actual costs can be passed along to the receiving division.

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Definitions:

Conventional CVP Analysis

A method used in managerial accounting to understand the relationship between costs, production volume, and profits. It stands for Cost-Volume-Profit Analysis.

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.

Variable Cost

Expenses that vary directly with the level of production output or sales volume, such as raw materials and direct labor costs.

Sales Revenue

Income earned from the sale of goods or services, representing the primary source of income for businesses involved in retail or wholesale trade.